Chapter 22 Econ

If the production of 25 sets of binoculars per day costs a firm​ $1,500.00 and the production of 26 sets of binoculars per day costs a firm​ $1,550.00, the marginal cost of producing 26 rather than 25 sets of binoculars per day is

50

The long run is any time period where

All inputs can be changed

The production function A. specifies the minimum amount of inputs necessary to produce a given level of output. B. specifies the maximum possible output that can be produced with a given amount of inputs. C. depends on the technology available to the firm. D. All of the above.

All of the above

When the total product function begins to increase at a decreasing​ rate, A. marginal product is falling. B. marginal cost is rising. C. the law of diminishing returns has set in. D. All of the above.

All of the above

Total costs divided by output equals

Average total costs

Which of the following statements describes a​ firm's long-run average cost​ curve?

A​ U-shaped curve that represents the minimum unit cost of producing any given rate of output

T/F: The marginal cost curve intersects the average variable cost curve and the average total cost curve at their maximum points.

False

T/F: The marginal product of labor is equal to total product divided by the number of​ worker-weeks

False

T/F: The​ long-run average cost curve is also called the marginal cost curve.

False

T/F: The​ long-run average cost curve is vertical.

False

T/F: Total variable costs vary inversely with the rate of production.

False

From the perspective of the​ firm, what is the difference between the short run and the long​ run?

In the short​ run, at least one input is​ fixed, while in the long run all inputs are variable.

When marginal costs are greater than average​ costs, average costs must

Rise

Assume a firm reduces its cost by shifting from paychecks to payroll​ cards, which are​ stored-value cards onto which the companies can download​ employees' wages and salaries electronically. If the only factor of production the firm varies in the short run is the number of hours worked by people already on its​ payroll, would the shift from paychecks to payroll cards reduce the​ firm's total fixed costs or its variable​ costs?

Since the wages paid to​ employees, the​ firm's variable labor​ input, have not​ changed, variable costs are unaffected. If the switch from issuing paychecks to payroll cards is​ cost-reducing, this change will cut its fixed costs of meeting its payrolls.

Why does the marginal product of labor eventually decline as more labor is used with another fixed​ input?

The labor will​ have, on​ average, fewer units of the other inputs to combine with and the increases to total output obtained from more labor will decrease.

What is a​ firm's minimum efficient​ scale?

The lowest rate of output at which the firm achieves minimum​ long-run average cost.

Which of the following is true about the​ long-run average cost​ curve?

The​ long-run average cost curve is the envelope of the​ firm's short-run average cost curves.

During autumn​ months, passenger railroads across the globe deal with a condition called slippery rail. It results from a combination of​ water, leaf​ oil, and pressure from the​ train's weight, which creates a slippery black ooze that prevents trains from gaining traction. One solution for slippery rail is to cut back trees from all of a rail​ firm's rail network on a regular​ basis, thereby helping prevent the problem from developing. If​ incurred, would this railroad expense be a better example of a fixed cost or a variable​ cost? Why?

This is an example of a fixed cost because the cost​ doesn't vary with the number of trains.

Another way of addressing slippery rail is to wait until it begins to develop. Then the company purchases sand and dumps it on the slippery tracks so that trains already en route within the rail network can proceed. If​ incurred, would this railroad expense be a better example of a fixed cost or a variable​ cost? Why?

This is an example of a variable cost because the cost varies with the number of trains.

T/F: AVC​ + AFC​ = ATC.

True

T/F: At the point of​ saturation, total product has reached its maximum.

True

T/F: Fixed costs do not depend on the rate of production.

True

T/F: In choosing the appropriate plant size for a​ single-plant firm during the long​ run, the firm will pick the size whose​ short-run average cost curve generates an average cost that is lowest for the expected rate of output.

True

T/F: When marginal cost is below average total​ cost, average total cost falls.

True

In the long run

all factors of production are variable.

The short run is any time period where

at least one input cannot be changed.

If total product is increasing at a decreasing​ rate, then marginal product is

decreasing

If a​ firm's long-run average costs increase as its output​ increases, the firm is experiencing

diseconomies of scale.

Economies of scale in production

indicate that as a firm​ expands, its​ long-run per-unit costs fall.

The law of diminishing marginal returns shows the relationship between

inputs and outputs for a firm in the short run.

The wage rate divided by marginal product equals

marginal cost

If a firm hires an additional worker and discovers that its total output has​ fallen, then it must be true that

marginal product is negative.

If marginal product is​ increasing, total product​ ________, and if marginal product is​ decreasing, total product​ ________.

must be​ increasing, may be increasing or decreasing

Average variable cost​ ________ when average product​ ________.

reaches its​ minimum; reaches its maximum

The law of diminishing marginal returns is caused by

the existence of a fixed input that must be combined with increasing amounts of the variable input.

When the​ long-run average cost curve is falling

the firm is experiencing economies of scale.

In​ economics, the planning horizon is defined as

the long​ run, during which all inputs are variable.

The short run is defined as

the period of time in which at least one factor of production is fixed.

The minimum possible​ short-run average costs are equal to​ long-run average costs when

the​ long-run curve is at a minimum point.

The​ firm's minimum efficient scale occurs

when economies of scale end and constant returns to scale begin.

The academic calendar for a university is August 15 through May 15. A professor commits to a contract that binds her to a teaching position at this university for this period. Based on this​ information, the short run for the professor

will be the nine month period between August 15 and May​ 15; any time period longer than this will be long run for her.

Marginal cost​ ________ when marginal product​ ________.

​increases; decreases

Minimum efficient scale refers to the​ ________ rate of output per unit time at which​ long-run average costs for a particular firm are at a​ ________.

​lowest; minimum